Hail drives higher June cat losses, but Q2 diverges for Allstate & Travelers


Severe hail storm events in Texas and Colorado drove June catastrophe losses higher for primary insurance carrier Allstate, as it reported $417 million of June losses largely due to three severe hail events, meanwhile Travelers reported an uptick in its second-quarter cat loss experience on tornado and hail activity.

Large hail image from D-7 RoofingThe June loss experience for Allstate took its first half estimated cat losses to $1.267 billion, pre-tax, lower than the prior year

First-half 2017 catastrophe losses for Allstate were estimated at $1.774 billion, pre-tax, as a much higher first quarter toll in 2017 due to an earlier start to the severe convective storm season.

In 2018, the first quarter saw a much lower level of catastrophe losses for Allstate, largely due to the slower start to the convective storm season this year.

It reflects just how important a peril large hail is, being one of the major contributors to catastrophe losses for U.S. primary players that are away from the coast.

For June 2018, Allstate’s estimated $417 million of catastrophe losses, pre-tax, came from a total of 16 catastrophe events, as well as some unfavorable reserve development on previous loss events.

However, 75% of the total came from just three severe hail events, that primarily impacted the Texas and Colorado areas.

A year earlier the insurer saw pre-tax catastrophe losses of $355 million across 17 events, so June has seen an uptick in the insurers losses.

The main driver of losses is likely to have been the Denver, Colorado area hail storms that are now estimated, along with other June activity, to have caused an insurance and reinsurance industry loss of roughly $3 billion.

But it is first half losses that are significantly down at Allstate, likely a reflection of the slower start to the severe convective thunderstorm season in 2018 as we mentioned above.

This means Allstate’s losses are probably well within the insurers modelled tolerances, meaning less is likely to fall to reinsurance capital providers than a year earlier and therefore less chance of any losses slipping through to the ILS market.

Allstates Q2 catastrophe losses are estimated at $906 million, of which the June hail activity contributes a significant proportion. That’s down on the insurers Q2 2017 catastrophe loss tally of $993 million.

Conversely, fellow U.S. primary insurance giant Travelers today reported elevated second-quarter 2018 catastrophe losses of $488 million, which the firms CEO Alan Schnitzer said were resulted in a $122 million after-tax increase in catastrophe losses put down to an “active tornado and hail season.”

So it’s interesting to see that while Allstate was hit harder by June hail losses, it seems Travelers has suffered more tornado and hail losses across the second quarter.

These two major insurers also set a tone for the coming reinsurance results season, with some of the property catastrophe focused players likely to take on a portion of the June hail losses from primary players, as well as further tornado and hail losses from other months in Q2 2018.

Interestingly, Schnitzer from Travelers also cited, “several recent quarters in which catastrophe losses exceeded our historical experience and expectations” which could suggest that the insurer will look to remove more of this severe weather volatility from its results in future, perhaps even buying more reinsurance, or buying reinsurance differently, to better protect its earnings.

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